September 3, 2013 / 8:57 PM / 4 years ago

GLOBAL MARKETS-Support for U.S. action in Syria limits stocks' rise

* U.S. stocks end up but off day's highs
    * Microsoft slumps after Nokia deal
    * Treasury bond selling resumes
    * U.S. manufacturing sector expands
    * U.S. dollar hits six-week high after major currencies


    By Caroline Valetkevitch
    NEW YORK, Sept 3 (Reuters) - World stock markets rose on
Tuesday but ended well off session highs as U.S. congressional
leaders voiced support for military intervention in Syria, while
bond yields rose and the dollar gained on strong U.S.
manufacturing data.
    A report showing U.S. manufacturing hit its fastest pace in
more than two years bolstered expectations the Federal Reserve
could begin to reduce bond purchases when it meets later this
month.  
    Wall Street stocks rallied at the opening after President
Barack Obama said over the weekend that he would seek approval
from Congress for a Syria strike, delaying the threat to Middle
East stability and oil supplies. But the market pulled back
after comments from Republican House Speaker John Boehner
expressing support for action. 
    House Majority Leader Eric Cantor also pledged his support
for action, and Nancy Pelosi, Democratic minority leader in the
House of Representatives, said she believes Congress will
support a resolution authorizing the use of U.S. military force
against Syria.
    "People still see uncertainty in Syria and want a decision
one way or another. Until we see something more definitive we
can see rallies continue to be questionable and a lot of selling
pressure," said J.J. Kinahan, chief strategist at TD Ameritrade
in Chicago.
    Traders had braced for a U.S.-led strike against Syria this
weekend following chemical weapons attacks that U.S. officials
say killed 1,429 civilians.
    The U.S. Congress returns from its summer recess on Sept. 9,
and will vote on authorizing a strike on Syria. While Obama has
been pushing Congress to back his plan, passage is by no means
certain.
    On Wall Street, where markets were closed Monday for the
Labor Day holiday, the Dow Jones industrial average 
gained 23.65 points, or 0.16 percent, at 14,833.96. The Standard
& Poor's 500 Index was up 6.80 points, or 0.42 percent,
at 1,639.77. The Nasdaq Composite Index was up 22.74
points, or 0.63 percent, at 3,612.61. 
    MSCI's world equity index, which tracks
shares in 45 countries, was up 0.3 percent, while European
stocks ended down 0.4 percent.
    Shares of Microsoft fell 4.6 percent to $31.88
after it announced a $7.2 billion bid for the phone business of
once-dominant Finnish manufacturer Nokia. U.S. shares
of Nokia shot up 31.3 percent to $5.12 in heavy
volume.    
    
    U.S. TREASURY SELLOFF RESUMES
    The stronger U.S. data, combined with good data on the
eurozone and China manufacturing sectors published on Monday,
caused selling in the U.S. bond market to resume. 
    "The Syria issue had put a floor on bond prices last week,"
said Mike Cullinane, head of government bond trading at D.A.
Davidson in St. Petersburg, Florida. 
    The 10-year benchmark U.S. Treasury note was
down 20/32, its yield at 2.861 percent. 
    The yield reached as high as 2.902 percent earlier, roughly
3 basis points below a 25-month high recorded on Aug. 22,
according to Reuters data.
    China's non-manufacturing purchasing managers' index dropped
slightly to 53.9 last month from July's 54.1. But it remained
solidly in expansion territory and suggested recent government
measures are supporting the economy.  
    The Treasury debt market posted negative returns for a
fourth straight month in August, the longest such streak since a
period spanning the end of 2010 to early 2011, when it recorded
monthly losses for six consecutive months, according to Barclays
data.
    Traders expect the Fed to start reducing its $85
billion-a-month stimulus program at its Sept. 17-18 policy
meeting unless U.S. payroll numbers due on Friday fall
considerably short of forecasts.
    The U.S. dollar jumped to a six-week high against major
currencies after the U.S. manufacturing data bolstered views the
Fed will start scaling back stimulus this month. 
    While expectations of a reduction in Fed bond purchases
support the dollar, a near-term withdrawal of Fed stimulus would
weigh on stocks, particularly those in emerging markets that
have come under pressure in recent months on expectations of
capital outflows.
    The dollar index, which measures the greenback against a
basket of six major currencies, hit a high of 82.516, its
highest since July 22. It last traded at 82.358, up 0.3
percent.
    Australia's dollar bounced more than half a cent as
its central bank kept interest rates at a record low 2.5
percent, as expected, on Tuesday. 
    Central banks in the euro zone, UK, Canada and Japan all
meet this week. 

    OIL, GOLD GAIN
    Oil and gold prices also rose after comments supporting
Obama's call for limited U.S. strikes on Syria. Oil prices also
drew support from the improving economic data in the United
States and China and concerns over crude oil supply.
    Brent crude rose $1.35 to settle at $115.68 a
barrel. U.S. oil settled at $108.54, up 89 cents from
Friday's settlement. There was no Monday settlement for the U.S.
benchmark due to the U.S. Labor Day holiday.
    Spot gold rose as high as $1,416 an ounce and was
last up 1.4 percent at $1,413.51 an ounce.

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